What You Need to Know about 96-month Car Loans

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

, - June 28, 2018

Auto loan terms have been getting longer lately, with some stretching out as long as 96 months, or eight years. The biggest reason why borrowers are extending their loan terms is because of the lower monthly payments. But, lower monthly payments don’t always mean a better deal on a loan.

Is an 8 Year Car Loan a Good Idea?

Choosing the right loan term can be tricky if money is tight and your credit is less than perfect. If you’re unsure about how long your car loan should be, consider the pros and cons of financing a vehicle for the next eight years:

Advantages of longer loans

  • Lower monthly payments – The more stretched out your loan term is, the lower your monthly payments will be.
  • May be able to get a nicer car – Although this type of deal isn’t offered by many lenders, you may be able to afford a nicer car if you take out a longer loan term. Generally, these are offered by credit unions, so discuss this with your lender to see if you qualify.

Disadvantages of 96-month auto loans

  • Higher interest rates and costs – The longer the loan, the more interest charges you end up paying. Lenders may also increase your interest rate to offset the longer loan term, making the overall cost of the loan increase.
  • Decreased car value – Depreciation is constant, and the longer you keep the car, the bigger the loss in value will be.
  • Increase the chances of being upside down longer – You increase the chance of having negative equity in the car for a longer period of time. This can be a problem if your car gets totaled, breaks down, or you decide you want to sell or trade it in before the term is up.
  • The future is uncertain – You don’t know how long the car will last, and eight years is a long time to be paying off a car. You have to hope the car holds up for that long, or else you’re making payments on something you can’t drive. You also don’t know what your income situation will be in eight years time.

Comparing Interest Costs

The biggest factor to consider when choosing a loan term is how much interest charges you end up paying. Say you want to borrow $15,000 for a used car and you get an 18 percent interest rate. Let's break this loan down with four different loan terms to see how stretching it out affects how much you pay overall:

Monthly Payment Interest Paid Total Cost
60-month Term $380.90 $7,854.17 $22,854.17
72-month Term $342.12 $9,632.30 $24,632.30
84-month Term $315.27 $11,482.30 $26,482.30
96-month Term $295.85 $13,401.30 $28,401.30

As you can see, your monthly payments are more affordable with a longer loan length, but you end up paying way more in interest charges – and more overall as a result – because of the longer term. So, if you decide you want a longer loan length, tread with caution and consider the overall cost. Crunching the numbers will typically show you that extending the loan isn't worth it in the long run, especially if you're facing a higher interest rate as a result of bad credit.

Try to Keep it Short

We recommend that you keep your loan term as short as possible. Unfortunately, not everyone is able to afford the higher monthly payments associated with shorter loan terms, but it's all about finding the right balance between what you can afford each month and how much you want to pay overall. Remember, you can take out a loan with a longer term now, and choose to increase your payments later on, which will pay the loan off earlier and lower your interest charges.

If you’re struggling with bad credit and need to find a local special finance dealer, let CarsDirect help. We work with a nationwide network of dealers that have the lending resources available to help. Our process is free of cost and obligation. All you have to do is take the first step by filling out our online auto loan request form today.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

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